Amazon Gets Physical

 I came across a very interesting article by Stephane Kuelian a retail marketing guru.  Below is a summary of why it makes sense for Amazon to establish a brick and mortar presence.

 

"From a strategic standpoint, physical stores are a powerful tool to increase Amazon global

revenues. Here are 9 reasons why Amazon gets physical.

1 – Physical bookstores will help Amazon attract bigger-name authors. What other

publishers can offer that Amazon cannot is coveted placement in physical bookstores.

Those tables you see in a bookstore when you first enter are hot properties in the world of

book marketing. And Amazon can’t compete with that, until it gets its own bookstores.

2 – One of Amazon’s secrets to customer service is that it accepts returns, no questions

asked. Physical stores would make it easy for people to return products.

3 – Amazon physical stores will be massive gateway drug products dealers. The Amazon

devices are super compelling to anyone who tries one. The trouble is, there’s no way to try

them unless you buy them. Retail stores will help. Each Amazon retail store will be much

more than just a gateway drug to Amazon’s products. It will be a gateway drug where

people will buy gateway drug products like the Echo.

4 – Retail locations will help Amazon win on delivery. Retail stores could double as product

pickup locations, distribution warehouses and, eventually, drone airports from which

products are flown to nearby homes and businesses.

5 – It is an opportunity to set-up “outlet corners“. Stores could serve as “outlet” stores to

sell returned merchandise, saving Amazon millions

6 – It is an opportunity to attract new customers. The majority of all retail sales still happen

in physical stores. Those real-world sales are Amazon’s growth opportunity.

7 – It is an opportunity to enrich customers database. One way to get new customers is to

get their credit card information and other personal details. Amazon can do that by

offering killer deals in physical stores. Once Amazon has someone’s credit card, it will be

able to remind that person later that buying more stuff is just a one-click deal now.

8 – Physical Amazon stores can encourage and facilitate showrooming. Another way

Amazon eviscerates traditional retailers is via the practice of showrooming. That’s where

you go to a brick-and-mortar store and find the product you want but then buy it on

Amazon – sometimes standing right there in the store, using Amazon’s mobile app. Once

friendly salespeople from Amazon help you find,install and use the app, you will be able to showroom not only in an Amazon retail store but you can also continue showrooming in other stores.

9 – A retail location acts as a sneaky reminder that Amazon can solve every shopping

issue. An Amazon store in the mall reminds everyone that Amazon.com is the place where

people can find anything and have it wrapped and delivered. Even if shoppers don’t enter

the store, just seeing the store is a reminder that Amazon could be the solution to

any shopping problems.

Let’s wrap it up. Amazon brick and mortar stores can be considered as the gateway to the

“everything store”. They make it easier for the brand to attract new customers and

make them loyal to the brand’s compelling products and services. What every store will make

a day as a turnover does not really matter."

Who needs a commercial real estate broker

Over the course of my career I have heard the question asked 'Who needs a commercial broker when I can do this myself?'

Well, you can do it yourself, just as you can repair you own PCs, fix your own HVAC system, or rewire your office.  You can do it, but do you have the time and knowledge to do it correctly?

Back in 2008, 2009 when you could tour a space and take your time deciding how you want to approach the owner, or maybe just look at another 20 or 30 spaces that were vacant, you could certainly do that. You knew when you were good and ready you could go back and make an offer and see how it went.  If it didn't work out, you could move on to another one, there was a never ending supply of like spaces.  Learn as you go was possible.

Fast forward to today. The market has turned.  You no longer have time to experiment. The industrial vacancy rate is at a 14 year low, property moves quickly.  You don't have the time to experiment. In todays market you have to find space quickly (or someone else will) and respond with a meaningful competitive offer.

A commercial real estate broker knows  how the market is reacting.  They can find a space quickly using the search engines that are not readily available to the public. They can sort through properties and remove ones that don't fit saving you time and allowing you to focus only the ones that work for you. That brings us to the Letter of Intent (LOI). Once the property is identified as a possible fit an LOI can be submitted quickly and effectively.  A broker knows that while the market is tight there are still deals that can be made that will save you money.  You no longer have the time for endless negotiations, since there very well may be another purchaser, lessee ready to scoop up the space you want. One other point for lessees- a relationship is established between the lessor and the lessee that will be ongoing for a number of years.  Negotiations can be tense and contentious  so why not allow the broker to absorb those bad vibes allowing you to establish a much friendlier relationship.

Upbeat Office Outlook

I had the opportunity to listen to a webinar conducted by CoStar reviewing the outlook for the office segment in commercial real estate.  It was good to note that in general it was very upbeat. Vacancies dropping in all major markets over the 2014 year end numbers.  Chicago was a bit above the national vacancy rate of 10.8% coming in around the 13% range but still improving from 2014.  The panel brought up an interesting point in their analysis.  Businesses will lease quality space in a great location over merely a less expensive rent.  In other words, just because an asking rent is low doesn't automatically mean the building will lease up.  Newer buildings have lower vacancy rates and higher rents than their older counterparts.  It makes sense, since the average office footprint is shrinking companies can seek out better but smaller square footage and still keep their rental budget the same.  The CoStar panel went on to say that 2016 is positioned to be another good year for the office segment and rent growth will continue but here in Chicago at a moderate pace.